Present: Patrick Lanning, Ron Farmer, Sandra Bishop, Dorothy Anderson, and Henry Masterson.

Others present: Randy Berggren Ken Beeson, Terry Bequette, Marc Anderson, Marty Douglass, JoAnn Anderson, Mike Logan, Lance Robertson, Mat Northway, Steve Hill, Jim Origliosso, Jim Wiley, Rod Wade, Dick Varner, and Krista Hince of the EWEB staff; Scott Maben, representing the Register-Guard; and members of the public.

AGENDA CHECK

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order.

General Manager Randy Berggren recommended, that, given the number of people wishing to testify later in the meeting, the Board defer Agenda Item 13 (General Service Deposit Policy) to the May 6 meeting.

Vice President Farmer moved, seconded by Commissioner Bishop, to defer Agenda Item No. 3 to the May 6 Board Agenda. The motion passed unanimously.

There were no other changes to the agenda.

APPROVAL OF CONSENT CALENDAR

Minutes

• February 18, 2003 Special Board Meeting and the March 4, 2003 Work Session

Resolution

• Initiates the process of issuing the refunding and new money bonds contained in the 2003 Financial Tool Kit. The Resolution requests the City of Eugene to authorize a total of $65 million of bonds of which $57 million is the refinancing of the Series 1994, Series 1996, and Series 1998A Electric System Revenue Bonds. The remaining $7 million of bond issuance is to finance the completion of the Walterville-Leaburg improvements.

Contract Awards

• Traid Mechanical Inc. - Leaburg Tailrace Barrier - Electric Division - $1,530,195
• Landslide Technology, Inc. - Leaburg Canal Slide Management - Electric Division - Not to Exceed $86,400 over four-year period
• Stillwater Sciences, Montgomery Watson Harza(MWH), and CH2M-Hill - Carmen Smith Relicensing. Leaburg-Walterville Relicensing, Other - Electric Division - approximately $3 million
• Squires Inc - Early Warning Dam Breach System - Electric Division - $139,611
• Morris P. Kielty General Contractor, Inc. - Summit Terrace 1250' Pump Station Construction - Water Division - $232,395

Business Service Agreement

• St. Vincent DePaul's - Energy Share- Customer Relations - Customer Services Division - $90,000

Intergovernmental Agreement

• Oregon State University, Department of Geosciences - Water Division - $22,895

Mr. Berggren recommended that the March 4 minutes be removed from the calendar for further editing by staff. He noted a correction to item 6, indicating that the reference should be Squires, Inc. rather than Engineering Monitoring Solutions.

Commissioner Anderson, seconded by Commissioner Masterson, moved to approve the Consent Calendar as amended. The motion passed unanimously.

ITEMS FROM BOARD MEMBERS

Commissioner Anderson asked if EWEB was doing a mail insert to respond to complaints regarding bills coming from Vancouver. Marty Douglass, Public Information Manger, indicated he would follow-up with staff to see if something could be gotten out quickly. President Lanning suggested that before that occurred, the Board request an analysis of whether the change had actually saved money. Mr. Berggren said that could be done. He added that EWEB had allocated the involved staff to other functions and did not lay them off. Mr. Douglass said he would schedule a bill stuffer if that was the direction the Board chose following review of the analysis.

Commissioner Bishop referred to public information sessions scheduled for residents of the McKenzie River corridor, but those sessions were not focused on the issue of representation. She had committed to residents that the Board would schedule a Work Session on the issues of concern to residents. Commissioner Bishop encouraged other Commissioners to attend the sessions. Mr. Berggren distributed an updated list of the scheduled sessions. He indicated staff would provide the Board with an update on the work that had been done, and he would attempt to schedule a half-hour of discussion during the upcoming Governance session. There was no objection.

Vice President Farmer determined from Mr. Berggren that federal representatives were present at the information sessions. He added his preference that the sessions be formatted as panel discussions rather than just EWEB meetings. Commissioner Anderson suggested that the McKenzie Watershed Council could be used as an impartial forum.

President Lanning thanked Mr. Douglass and his staff for developing the public information sessions process and the opportunity for dialogue that had been created.

President Lanning said that Lance Robertson, External Communications Coordinator, was working to schedule the Board to attend various neighborhood and community group meetings. He thanked Mr. Robertson for his effort.

CORRESPONDENCE

Mr. Berggren called attention to an update on Public Employees Retirement System legislation, copies of the op-ed piece submitted to The Register Guard, and a memorandum regarding Earth Week activities.

Mr. Berggren previewed the agenda of May 6.

PUBLIC INPUT

President Lanning called for public input.

Delsa Petalou, 620 North Garden Way, expressed concern about the utility's deposit policies and potential rate increases. She was a disabled single mother of four and lived on a very limited income; because of her income, she had to pay her utilities in turn. She recently faced disconnection of both her gas and water. She said she choose to pay her gas bill and then her water was disconnected for four days, adding she thought it wrong to cut someone's water supply. When she came to EWEB to arrange for payment, she was told she must come up with the full amount, and in addition required to pay a deposit of $165 on her electric bill, which must be paid by April 21 or she would lose electricity. Ms. Petalou said that the deposit was like a way of kicking her when she was down. She had no way to raise the money, and only limited resources to help her, such as the Blues for Hues program and her church, which provided partial assistance. She asked the Board for help and for EWEB to work with her. She feared that increasing demands would force her out of her home. Ms. Petalou said that she was not alone in her situation.

Commissioner Anderson confirmed with Ms. Petalou that she received assistance from Energy Share and the Low-Income Energy Assistance Program (LIEAP). Commissioner Anderson asked if Ms. Petalou had discussed alternative payment approaches to her electric bill with staff. Ms. Petalou said yes, but her electric bill had not fallen behind, and she did not understand why she was being asked to pay a deposit on that. Mr. Berggren said that he would connect Ms. Petalou with Chuck Dalton, who was present at the meeting.

Scott Crawford, 52 West Broadway, reiterated the concerns expressed by the Eugene Solar Contractors regarding EWEB's suspension of the Solar Electric Program on March 18. He asked the Board to reinstate the program at the earliest possible time. He also asked the Commissioners to retain the tiered rates to reward customers who conserve electricity.

Dan Montgomery, 747 Spyglass Street, expressed concern about EWEB's deposit policy for commercial property owners. He co-owned an apartment complex and because he changed property management companies, he was perceived by EWEB to be a new customer and EWEB requested a $1,300 deposit for outside lighting and the utility room, which he had never been required to pay a deposit on before. He had owned the property since 1990 and had never been late on an EWEB bill. When he asked about the practice, he was told that the property management company was the customer, not him. Staff was not interested in his deed. He had sent a letter to Mr. Berggren and JoAnn Andersen, Customer Services Director, and received the same response. Mr. Montgomery believed the policy had caused ill will toward EWEB in the community as the same thing was happening to other people. Because of the deposit, he had not changed property management companies; in essence, EWEB was dictating who managed his property.

Commissioner Anderson noted that the postponed agenda item dealt with the issue of concern to Mr. Montgomery. Mr. Berggren believed that staff had arrived at a recommendation that would lessen the impact of the deposit policy on such situations as Mr. Montgomery's.

ELECTRIC RATE PROPOSAL

John Yanov, Senior Rates/Financial Analyst, joined the Board for the item. He said the first item before the Board was an electric rate increase that he characterized as a Bonneville Power Administration (BPA) pass-through. The second item was a flat rate proposal for the residential rate class, prepared at the request of the Board.

Mr. Yanov said that there were two additional items before the Board, which he characterized as housekeeping measures: 1) a continuation of the power surcharge; and 2) language changes to the medium-large service rate schedules.

Mr. Yanov called the Board's attention to the meeting packet materials related to the item.

Mr. Yanov indicated the rate increase, a six-percent overall increase, would be effective in June 2003, and would be effective through October 2003. He said that the BPA could change rates significantly in September. Staff hoped the increase would carry the utility forward to spring 2004.

Mr. Yanov put forth another option, that of removing the 5 percent conservation adder for this rate change alone, bringing the overall increase down to 5.7 percent and the residential increase down from 5 percent to 4.7 percent.

Vice President Farmer determined from Mr. Berggren that staff was proposing a rate increase now to avoid a rate increase in October 2003. Mr. Berggren said that the item was scheduled because of Board direction taken during Vice President Farmer's recent absence. The rate increase would increase revenues from rates by $3 million over the six-month period. Mr. Yanov said that Commissioners mentioned a preference for a summer rate increase over a winter increase.

Responding to a question from Commissioner Anderson, Mr. Yanov said that because the rate increase was totally power-related, it did not seem reasonable to add to the fixed part of EWEB's non-power related expenses. Mr. Berggren said that energy charge for all tiers would be adjusted by the same amount.

PUBLIC HEARING OF ELECTRIC RATE PROPOSAL

Commissioner Lanning opened the public hearing.

Jim Seaberry, 3294 Stark Street, River Road/Santa Clara Property Owner's Association, reviewed residents' response to a poll conducted by the organization, and noted the opposition to a rate increase indicated by that response, as well as support for tiered rates, support for discontinuing the credit card payment program, support for a reduction in the Contribution-In-Lieu-of Taxes paid to Eugene, support for postponed pay raises and hires, support for eliminating programs that low-income customers could not participate in, support for shortened office hours, and opposition to EWEB handling the billing for the City's transportation system maintenance fee.

Responding to a request for clarification from Commissioner Bishop, Mr. Seaberry said he was objecting to energy-saving programs that low-income persons could not afford to participate in.

Janet Marshall noted the impact of the drought and the California energy crisis on power rates, and asked that the Board work with other utilities to "cut the head off this monster," meaning the BPA, so that utilities could stop reacting to rate increases and create a vision of the future. She called for intensified lobbying efforts, more staff to lobby, and more informed citizens. She did not believe that there should be a problem with hydroelectric power in the Northwest, and thought the problem was the complex system created to get power to other states. Ms. Marshall asked EWEB to take a leadership role and form an aggressive coalition to address issues at the State and federal levels.

Fran Gillespie asked that more detail be provided on the conservation adder. She asked the Board to reject the rate increase proposal because of other recent rate increases. She said that her three-percent cost-of-living adjustment could not keep pace with EWEB's percentage rate increases. Ms. Gillespie noted that she had one less family member living in her house but her bill was twice the amount as it was before the previous month. She said the economy was in recession, and those living on fixed incomes could not afford the increase. She believed that EWEB had mismanaged its funds in the past, citing the energy source building and fiber optics as examples. Ms. Gillespie said that EWEB should not ask for higher rates until it cut its budget.

President Lanning closed the public hearing.

ELECTRIC RATE PROPOSAL

Mr. Yanov reiterated the staff recommendation.

President Lanning called for questions and comments.

Commissioner Anderson asked about the impact of reducing the conservation adder on EWEB's programs for low-income customers. Mr. Yanov believed it could be managed without an impact on those programs.

Vice President Farmer indicated he would not support a rate increase at this time. He said that the Board identified $9 million in budget reductions, and the increase was not necessary now. He acknowledged that what BPA would do was unknown, but wanted to deal with that when it occurred. He said that the community was suffering economically and unemployment in Oregon was among the highest in the nation.

Commissioner Anderson supported the increase and did not support reducing the conservation adder. She pointed out that the Board had already made considerable cuts in the budget. She thought the Board needed to do something now or in the fall, and she preferred to act now so EWEB did not have to raise rates prior to the heating season.

President Lanning determined from Mr. Berggren that the rate increase was proposed in addition to the $9 million in reductions. President Lanning pointed out that the reductions only carry EWEB forward through October, as they were not sustainable reductions. He wanted it to be clear to the community that the Board had made budget reductions and heard the message about the need for such reductions "loud and clear."  

Speaking to the issue of the conservation adder, Commissioner Bishop determined from staff that the reduction made would not affect the conservation programs this year, although a similar reduction could threaten the viability of programs next year.

President Lanning wanted to hear from staff that EWEB would not be required to do two rate increases this year. Mr. Varner said he could not make an ironclad guarantee, but he believed that the calculations underlying the increase were sufficient to address future BPA increases.

President Lanning asked what the rate increase would be in absence of the budget reductions. Mr. Varner estimated an additional six to seven percent on an annual basis. If EWEB was to attempt to collect the needed revenue over the six to seven months remaining in the calendar year, the increase would be in excess of ten percent.

Vice President Farmer did not support raising rates now to avoid a rate increase later. That only meant EWEB would be charging ratepayers an extra six months of higher rates prior to the rate increase. Commissioner Anderson believed that the Board would have to raise rates by a higher percentage.

Commissioner Bishop also questioned the logic of raising rates now if EWEB expected a rate increase from the BPA in the fall. She agreed with the remarks of Vice President Farmer. She said the community was in crisis, and people were making day-to-day choices between paying their electric bill, putting food on the table, and buying medicine. Commissioner Bishop questioned how the Board could rationalize the rate increases to the community at this time. She could not.

Mr. Varner clarified that the rate increase was a pass-through of two BPA increases in the period between April 2003 through September 2003. The tool kit could mitigate the impact of that somewhat. The issue before the Board was whether to pass through those increases or take an exception to its policy and not pass through the increase. Commissioner Bishop responded that the Board had no such policy in place. She recommended that the Board give the community warning that it would pass through the BPA power cost increases when they happen, and that it had some catching up to do. However, she did not want to raise rates tonight.

Vice President Farmer said that the tool kit was intended to mitigate the BPA rate increases, and EWEB did not have to "hit a community that was economically reeling now" if those changes were implemented.

Mr. Berggren clarified that the Board did have a policy in place about passing BPA's rates through to the ratepayers, and that addressed the timing of such increases. Mr. Varner said that the policy stated that staff would bring the rate increases to the Board as they occurred, and the Board chooses whether to pass them on or not. Commissioner Bishop agreed, and apologized for not being more precise; she reiterated that the issue was one of timing, and suggested the policy be refined to state that every six months the Board would pass the BPA rates through to the ratepayers. That would ensure that the BPA rate increases were not absorbed by EWEB.

Commissioner Masterson asked if the reductions made would sustain EWEB through to fall 2003. Mr. Varner said yes. EWEB had the money to pay its bills through the calendar year if the Board approved the budget tool kit. He said that EWEB was not facing a situation where a rate increase was required now. No ground would be lost on EWEB's financial position, but no ground would be gained, either.

Commissioner Anderson reiterated her concerns about a rate increase prior to the winter months as she was concerned that people would be unprepared.

Commissioner Masterson did not think that economic times would improve in six months, and suggested that the issue was one of the timing of making a needed increase.

Commissioner Bishop agreed with the remarks of Vice President Farmer regarding the fact EWEB would merely be collecting a higher rate for six months. She suggested that by the time EWEB considered a fall increase, the economic conditions would have improved.

Commissioner Anderson maintained that the fall rate increase would have to be higher if the rate was not increased now.

President Lanning thought passing the rate now would help EWEB achieve its goal of getting out of debt. Dick Varner, Fiscal Services Supervisor, said the ultimate impact of what the Board would affect the timing of when the surcharge was removed. A rate increase now meant the surcharge would come off sooner. If the Board delayed, the surcharge would still be removed in about 36 months.

Vice President Farmer pointed out that in reality, EWEB would be removing the surcharge from the tool kit.

Responding to a question from Commissioner Masterson, Mr. Varner confirmed that the surcharge was intended to retire $30 million in short-term debt, and to get EWEB's reserves back to the minimum target levels established by the Board.

President Lanning liked Commissioner Bishop's idea of educating the community prior to a rate increase, but pointed out that while there had been considerable news coverage of the Board's actions, few people seemed to be aware of what was going on. He did not think the community would have a better memory in October. EWEB must pass on the BPA's increases.

Commissioner Anderson moved to accept the staff recommendation for the rate increase without the conservation adder to reflect a passthrough of BPA wholesale rate adjustments for April-September 2003.

President Lanning determined there was no second to the motion, and it died for lack of a second.

Vice President Farmer wanted EWEB to do more community education about the tool kit, and suggested that information be in the form of a bill stuffer. He wanted people to recognize the cuts that had been made. He did not think news articles in the paper got the message across.

Commissioner Bishop moved to let the ratepayers know there would be a rate increase effective in fall 2003 bills to cover any BPA power cost increases, and that the Board not institute a rate increase tonight.

Vice President Farmer did not like the way the motion was phrased, given the many unknowns facing EWEB. He pointed out that EWEB was challenging the BPA on its rate increases and a hearing was scheduled on that challenge, and he did not want to tie the Board's hands for the future. In response, Commissioner Bishop noted that the utility had already absorbed two increases from the BPA, which EWEB would have to address at some time.

Commissioner Masterson thought that EWEB should be precise about when the fall rate increase would be. Vice President Farmer asked if that was possible. Mr. Varner indicated that the BPA would inform EWEB of any increase by September 1, giving EWEB time to implement a rate increase in the bills for November 2003.

Commissioner Bishop modified her motion to indicate the rate increase would be effective November, 2003.

President Lanning thought EWEB had done its best to let people know that BPA was raising its rates and EWEB was absorbing them, but people did not indicate an understanding of that fact. Absorbing those increases backed the utility into a corner and risked the liability of the system, and EWEB's ability to respond to emergencies. He acknowledged the hard work done on the tool kit but believed EWEB's absorption of BPA rates sent a mixed message to the community. Speaking to the remarks of Ms. Marshall (Public Input), President Lanning said that Mr. Berggren was going to Portland the next morning to tell the BPA it could not keep raising rates.

President Lanning called for a second to the motion. Commissioner Masterson seconded the motion.

Vice President Farmer indicated opposition to the motion because he perceived it as a tacit rate increase. He was willing to tell the community the Board expected to pass through the BPA increases, but he was not prepared to say that it would for sure.

Commissioner Bishop thought it irresponsible for the Board to assume it could pass no rate increase. Vice President Farmer said he did not disagree, but the issue was a philosophical one for him.

Vice President Farmer asked if Mr. Berggren viewed the motion as a rate action. Mr. Berggren said no, and neither did he interpret it as tacit approval of a rate increase. Staff would be before the Board again with numbers and a rate proposal in the fall. He would not rely on the motion to raise rates. He perceived the motion as a statement of the Board's intent to pass through any BPA rate adjustments to the ratepayers.

At President Lanning's request, Commissioner Bishop restated her motion as follows:

Commissioner Bishop, seconded by Commissioner Masterson, moved that EWEB will adjust rates to pass through any BPA power cost adjustments in the fall, with rates to become effective in November, 2003. The motion passed, 3:2; with President Lanning and Commissioners Anderson and Masterson voting yes, and Vice President Farmer and Commissioner Bishop voting no.

Commissioner Anderson pointed out that EWEB was in the hole already as a result of BPA cost increases, and failure to take a rate action made the issue worse.

Vice President Farmer noted his opposition to the motion was based on the use of the word "will."

Commissioner Masterson interpreted the motion as stating the Board would pass through any adjustments as opposed to instituting a rate increase. Commissioner Farmer was unwilling to make any decision on the subject until he was considering an actual proposal.

Mr. Berggren indicated in the absence of action by the Board, staff would attempt to find ways to communicate the utility's sense of certainty for a future rate action to the ratepayers, and describe the budget reductions that had taken place. Mr. Varner observed that the Board's action was consistent with its March discussions relative to the tool kit.

Vice President Farmer, seconded by Commissioner Bishop, moved to approve the housekeeping items identified by staff, 1) a continuation of the power surcharge; and 2) recommended changes to the policies and procedures that relate to the minimum charges. The motion passed unanimously.

President Lanning called for a brief meeting recess.

ELECTRIC FLAT RATE PROPOSAL

Speaking to the last item, Commissioner Bishop clarified that she intended to support a rate increase in the fall as the responsible thing to do, unless conditions were very different than currently projected.

Mr. Yanov was present for the item. He said that the proposal, prepared at the request of the Board, was for a possible return to a flat rate structure for the residential class of customers, and would be effective in June, 2003. He said the rate, if approved, would be 3.8 cents per kilowatt. Billing impacts ranged from -26 percent to 10 percent. He reviewed data showing the impact of the proposal on each tier block. Mr. Yanov invited questions.

ELECTRIC FLAT RATE PROPOSAL PUBLIC HEARING

President Lanning opened the public hearing.

Comments from Jim McCloud, 39316 Easton Lane, Walterville, were read into the minutes. Mr. McCloud did not favor tiered rates. He had built an all-electric house and took advantage of conservation measures but his rates were higher than ever before. He believed that all customers should pay the same rate.

Janet Calvert, 1062 Woodside Drive, League of Women Voters, urged the Board to retain tiered rates to conserve electricity. She noted the league's long-time support for such rates structures to accommodate essential uses and discourage waste. She spoke of the importance of conservation, saying it was a means of purchasing additional, non-polluting capacity. She noted that the Oregon Energy Plan included a goal to reduce 50 percent of the state's load growth through conservation. That would not be possible without retaining all current conservation policies and rates. Conservation measures provide jobs and keep money in the community. She asked EWEB to continue to educate rate payers about conservation and to continue to offer weatherization assistance to low-income customers. Ms. Calvert said that while the time of use pricing was not under discussion, she suggested that the Board consider it as a means to level out residential electricity demands over a 24-hour period.

Don Marx noted the steps he had taken to weatherize his house with the assistance of EWEB. He did not know what more he could do. He felt as though he was being punished for his use of electricity. He said that the residential customers do what they could to conserve electricity, and the tiered rates would not result in more conservation.

Todd Sloan commended the Board for the service EWEB delivered. He said that electricity was a good deal. However, he said that tiered rates were difficult for families, who use lots of electricity. He lived in a drafty house and had to choose between sending his children to college or weatherizing his house. He decided to send his children to college. He did not think he should be penalized for having a large family through higher electric costs.

William Merris said he supported the tiered rates. He worked for the BPA and said that the agency was in the same position as EWEB. It was not due to bad decisions by managers, but rather a result of exploitation of deregulation by the energy trading corporations, who continue to force the BPA to buy spot market power at high rates. The Bush administration and the Federal Energy Regulatory Commission was allowing Enron to steal money from the taxpayers, and that was where lobbying should be directed. He supported tiered rates because low-income people would be disparately affected by energy costs. Only those in the third tier who use lots of energy would realize savings. He sympathized with those with an all-electric homes and said that most residents were in the same position. Mr. Merris said that electric heat cannot be delivered at the same low rates as it was in the past. Power would not get cheaper or more plentiful. Without tiered rates, people would not conserve. They must have incentives and disincentives to conserve.

Ruth Duemler supported tiered rates and energy conservation. She said that in the long-term, conservation would save money for every rate payer. The system encouraged conservation. She suggested that people were confused about the tier they were in, and encouraged more education about that and more explanation about why conservation was needed. She said that 46 percent of ratepayers were in the first tier and could face an estimated 30 percent increase in their rates. That was high for a low-income person. Those in Tier 2 would also face an increase. She thought the proposal should have been better explained in the utility bills mailed the previous month.

Ms. Duemler called for building code changes that created more energy-efficient buildings, citing as example a reduction in window glass.

David Hinkley, 1350 Lawrence Street, #6, said that EWEB's costs were tiered and he believed that having tiered rates reflecting that for usage was fair and reasonable. If he could conserve so that EWEB did not have to go to the spot market or BPA, that was fine; if someone with an electrically heated outdoor hot tub in the winter kicked EWEB into the spot market, he did not want to pay for it. He said that the flat rate proposal was still a tiered rate; the difference was that commercial users appeared to get lower rates than residential users. He supported the tiered rates. He suggested that in the future, EWEB consider time-sensitive meters so that people who use electricity at low-demand hours see that reflected in their bills. Mr. Hinkley believed that was one way to meet EWEB's mission as a public utility of providing electricity at as close to cost as possible.

Charles Collins, 1412 Parnell Drive, said he built his house when EWEB was advocating for electric use and now he was being penalized for having an all-electric house. He said he was on a fixed income. He thought the flat rate would be a fair rate for those with no other choice. In response to a question from Commissioner Anderson, Mr. Collins indicated he had used EWEB weatherization programs to weatherize his house.

President Lanning closed the public hearing.

FLAT RATE PROPOSAL

Mr. Yanov invited questions.

President Lanning called for Board discussion.

Vice President Farmer noted that his correspondence on the topic was equally split, making the decision more difficult. He spoke to the $10 million EWEB spent annually on conservation programs, nearly half of what it spent on capital expenditures. He thought that demonstrated EWEB's commitment to conservation. Vice President Farmer said tiered rates were intended to create conservation, but he was unsure they had been successful. The materials prepared by staff did not convince him. He believed that tiered rates should work, but saw no hard evidence. He said EWEB's purpose was to provide safe, reliable electricity at as low a cost as possible, and to treat people fairly and equally. He pointed out that different people with different needs did not pay more for gas, food, or clothes. Vice President Farmer said that the comments of those who did not believe that they had been treated fairly convinced him to support a return to flat rates.

Commissioner Anderson said that the Board adopted tiered rates out of concern for future resources and sustainability. Conservation was very important to that. Conservation encouraged people to switch to gas, which was better than electricity for many purposes. She thought the staff materials supported the contention that tiered rates were working to encourage conservation, particularly for higher-usage residences. Commissioner Anderson expressed concern that a return to flat rates would result in customer service staff being overloaded with calls from those who saw their rates increase. Many of those who complained were better off with tiered rates but were confused about the issue. They would be worse off under a flat rate.

Commissioner Anderson expressed concern about continued changes to the rate structure. She thought it better to make changes to the rate structure when there was a rate decrease or if EWEB added the City's transportation system maintenance fee to its bill.

Commissioner Bishop was concerned about how the rates affected real families, and she had heard from many people who were gross users because they had large families living in a single house. If calculated on a per capita basis, they were using less energy than their neighbors, but getting penalized for their size. She acknowledged the principle behind tiered rates, but thought the rate design did not work. She found them inequitable and unfair. She agreed with Vice President Farmer's remarks about the different needs of different people, and said that those affected had no recourse. They were in older electric houses, on fixed incomes, and had no access to gas. She thought the tiered rates a one-size-fits-all approach that did not fit all customers. Commissioner Bishop said that people should pay for the power they use. She thought the community a conservation-minded community, and a return to a flat rate would not affect that. People would continue to conserve.

Commissioner Bishop suggested that if EWEB was to have tiered rates, it have a design that did not penalize users. She thought that if EWEB was to have tiered rates, it needed to have such things as time-of-use metering.

Commissioner Masterson said regardless of what the Board did, some one would think what it did was unfair. He said he had not heard the complaints that other Board members had, and questioned how many people were satisfied with tiered rates but had not appeared to testify. He did not think that flat rates treated customers more fairly than tiered rates. The low-income and those on fixed incomes would suffer if tiered rates were eliminated. Commissioner Masterson believed that to stop tiered rates sent the community a signal that the Board was not being as stable as it should be in its decision making.

President Lanning recalled his previously expressed concerns about adopting a tiered rate system at a time when EWEB was also raising rates by 36 percent; he had voted no at the time, and had called for a future review of the system. He did not believe that EWEB had a perfect tiered system, and that it was in some ways a crude instrument. He agreed there was no evidence as to its actual impact, and people were very confused about the tiered system and its actual impact.

Continuing, President Lanning said that one of the most important values the Board talked about was sustainability and EWEB's connection to the larger system. How the community and individual users made decisions impacted EWEB's rates. Because of his interest in sustaining conservation and retaining that focus, he believed that changing the structure now would not be sending the right message. He said that EWEB needed to acknowledge that the system was not perfect, and that the system should reward people more directly for conservation. He shared Commissioner Bishop's interest in time-of-use metering, which could more directly connect users to the rate structure. He intended to vote in support of the tiered rate structure, although he could see validity in the arguments offered against it.

Vice President Farmer believed that the tiered system encouraged people to switch to natural gas; most new houses were designed for natural gas, which allowed residents to pay lower energy rates. In essence, EWEB was switching users from a renewal, hydro power resource to a non-sustainable fossil fuel. He did not believe that represented sustainability.

Vice President Farmer spoke to the issue of stability, acknowledging its importance but suggesting that it was "never too early to right a wrong."

Vice President Farmer, seconded by Commissioner Bishop, moved to eliminate tiered rates and move to a flat rate system with the June, 2003 billing.

Commissioner Anderson said that EWEB's rates, even in the third tier, were lower than most Southern California utilities. She suggested that the rates needed to be in a larger perspective.

Commissioner Bishop said that while it appeared that those affected on a percentage basis were a small number, those ratepayers represented a larger number people because of the number of large families involved. She said that when she was referring to large families, she was not referring just to families with children, but those families who were so economically disadvantaged they had several generations living in a single household. She shared the interest in sustainability shared by others, but believed the community was in crisis and EWEB could not afford to ignore people in the name of a larger principle. People's lives were being affected, and they did not have the option of leaving.

Referring to testimony suggesting that EWEB had tiered costs, Commissioner Bishop found that interesting, but pointed out that long-time customers had already paid for the system and perhaps new customers should be charged more because growth was contributing to the increase in power costs.

Vice President Farmer said that his point was that neither gas or coal was a renewal resource. When people switched to natural gas, they were moving from a renewable resource to a nonrenewable resource. Mr. Maloney said that was not the case; at the margin, that house would either be heating with natural gas or someone would be burning gas in a combustion turbine some place at half the efficiency of heating the house with electricity. He reiterated that the resource turned back when the kilowatt hour that was not purchased was not hydro power, but gas or coal. Hydro was generating all the possible megawatt hours that it could in the region. One could either burn gas at a high efficiency, or at half the efficiency in a combined cycle plant somewhere in the region.

Vice President Farmer posed the possibility that everyone switched to natural gas. Mr. Maloney could not answer the question as he could not envision that occurring and there were insufficient fossil fuel power plants to do so. Vice President Farmer suggested that was the problem.

President Lanning stated he lived in an all-electric home with his large family and at times had fallen into the third tier. He was familiar with the concerns expressed by those with large families. However, he was looking to the future and the probability that no more dams would be built in the northwest.

The motion failed, 3:2; with President Lanning and Commissioners Anderson and Masterson voting no, and Commissioner Bishop and Vice President Farmer voting yes to eliminate tiered rates and move to a flat rate system with the June, 2003 billing.

Commissioner Anderson, seconded by Commissioner Bishop, moved that EWEB maintain the tiered rate system and continue to consider different rate designs.

Commissioner Bishop supported examination of different rate designs but would vote against the motion because of her opposition to tiered rates.

The motion passed, 3:2; with President Lanning and Commissioner Anderson and Masterson voting yes, and Vice President Farmer and Commissioner Bishop voting no.

TOOL KIT BUDGET AMENDMENTS

Mr. Varner requested approval of the budget amendments to implement the $9 million in cost reductions pursuant to the Board's tool kit discussions.

Vice President Farmer, seconded by Commissioner Masterson, moved approval of the $9 million in cost reductions pursuant to the Board's tool kit discussions. The motion passed unanimously, 5:0.

GENERAL SERVICE DEPOSIT POLICY

This item was deferred to the May 6 Regular Board Meeting.

The meeting adjourned at 10:40.

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Assistant Secretary President